04-23-2011, 06:43 PM
I need your help on the cash budget from 1st July - 31 December 2011
"Minh Nguyen has indicated that the organisation should invest $95,000 in an automatic inventory-handling system which will be acquired on 1st July 2011 to control the movement of inventory in the warehouse. This equipment purchase will be financed primarily from the firmâs funding capabilities. However, Minh Nguyen believes that the organisation needs to keep minimum cash balance of $25,000. If necessary, the remainder of the equipment purchase will be financed using a short-term loan from a local bank with a minimum period of three months.
Budgeted opening cash balance as of June 30 shows at $45,000. If the company develops cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due. (Cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 16% per annum. The company must borrow in multiples of $1,000. No money is owed at the end of June."
Can someone help me, I dont know how the transaction of buying new equipment influence the cash budget because it does not mention when $95,000 is paid. Is it paid at 1st July ? If yes, at the beginning of July we must to borrow $75,000, right ?
Thank you very much.
"Minh Nguyen has indicated that the organisation should invest $95,000 in an automatic inventory-handling system which will be acquired on 1st July 2011 to control the movement of inventory in the warehouse. This equipment purchase will be financed primarily from the firmâs funding capabilities. However, Minh Nguyen believes that the organisation needs to keep minimum cash balance of $25,000. If necessary, the remainder of the equipment purchase will be financed using a short-term loan from a local bank with a minimum period of three months.
Budgeted opening cash balance as of June 30 shows at $45,000. If the company develops cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due. (Cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 16% per annum. The company must borrow in multiples of $1,000. No money is owed at the end of June."
Can someone help me, I dont know how the transaction of buying new equipment influence the cash budget because it does not mention when $95,000 is paid. Is it paid at 1st July ? If yes, at the beginning of July we must to borrow $75,000, right ?
Thank you very much.